Graham Corporation 2027 Q1 Earnings Call

Thank you, Dylan, and good morning, everyone. Welcome to Graham's first quarter fiscal 2027 earnings call. With me on the call today are Matt Malone, President and CEO, and Chris Thome, Chief Financial Officer. This morning, we released our first quarter fiscal 2027 financial results. Our earnings release and accompanying presentation to today's call are available on our website at ir.grahamcorp.com. You should be aware that we may make forward-looking statements during the formal discussion as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release, as well as with other documents that are filed by the company with the Securities and Exchange Commission.

You can find these documents on our website or at sec.gov. During today's call, we will also discuss non-GAAP financial measures. We believe these will be useful in evaluating our performance. However, you should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and slides. We also use key performance indicators to help gauge the progress and performance of the company. These key performance metrics are ROIC, orders, backlog, and book-to-bill ratio. These are operational measures, and a quantitative reconciliation of each is not required or provided. You can find a disclaimer regarding our use of KPIs at the back of today's presentation.

With that, if you'll please advance to slide three, I'll turn the call over to Matt to begin.

Matt? Thank you, Tom, and good morning, everyone.

We appreciate you joining us to review our first quarter fiscal 2027 results. I am pleased with the start to fiscal year 2027 as we continue to execute on our strategic priorities and see significant momentum across the end markets we serve. Our first quarter results demonstrate the continued growth and durability of our platform. We delivered record first quarter revenue of $71.3 million, an increase of 29%, with growth across each of our businesses. Adjusted EBITDA increased 28% to $8.8 million, totaling $95.9 million, and backlog increased to another record of $557 million. These results reflect the strength of our diversified business model, strong demand for our mission-critical technologies, and disciplined execution across the organization. The benefits of these investments we have made over the last several years are beginning to bear fruit as well.

We have expanded capacity, strengthened our engineering and manufacturing capabilities, invested in automation and advanced testing infrastructure, modernized our systems, and broadened our technology portfolio through the acquisitions of FlackTek and Xdot. Many of these investments are now operational and beginning to support higher production volumes, new program opportunities, and improved operational performance. On our fourth quarter earnings call and our Investor Day in June, we provided our guidance for fiscal 2027, calling for 18% revenue growth and 44% adjusted EBITDA growth. Our strong start to fiscal 2027 positions us well to achieve those targets. Additionally, we outlined how the investments are making, combined with favorable demand environment and our record backlog, position Graham for sustained profitable growth.

We introduced a three-year financial framework targeting 8%-10% organic revenue growth and adjusted EBITDA margins of 14%-16% by fiscal year 2029, with our sights set on achieving top quartile performance over time. During the quarter, we continued to make significant progress towards these goals. Turning to our end markets on slide four and starting with defense. Demand remains very strong. Defense revenue increased 40% during the quarter, driven by timing of project milestones, new program activity, and continued growth across existing programs. Our performance reflects the strategic importance of the platforms we support, the durability of our customer relationships, and our ability to execute on highly complex mission-critical applications. Our naval business continues to benefit from increasing activity across the Columbia and Virginia-class submarine programs, as well as the MK48 Mod 7 heavyweight torpedo program.

During the first quarter, we received approximately $61.8 million of new and follow-on defense orders supporting these programs. Also, as we announced in our release last night, we secured a new contract to provide MK19 Mod 2 air turbine pump assemblies supporting submarine fleet spares, which, when combined with the Mark 48 award in the first quarter, totaled approximately $43 million. These awards are a validation of the investments we have made to increase our capacity and technical capabilities. Our new Navy and X-ray facilities in Batavia are operational. Our automated welding systems have been commissioned, and our assembly and test capabilities are increasingly supporting production. These investments improve throughput, enhance quality, and position us to meet increasing production requirements across critical Navy platforms for decades to come. Beyond our traditional Navy business, we continue to see attractive opportunities in next-generation defense applications, including radar and directed energy systems.

Our thermal management, cooling, power electronics, and turbomachinery technologies provide meaningful advantages in applications where customers require greater capability in increasingly compact systems. Several of these programs are transitioning from development to production and represent attractive multi-year growth opportunities. Moving to space, momentum continues to build. Space revenue increased 86% during the quarter, reflecting new programs, the continued ramp of existing programs, and contributions from FlackTek. Orders totaled $14.4 million, representing a book-to-bill of 2.3 times. Customers across both commercial and government-funded programs continue to advance from development and qualification into production. That progression is increasing demand for our highly engineered turbomachinery, cryogenic systems, pumps, motor controllers, and precision components. Our investments in testing and manufacturing capabilities are strengthening our competitive position as these programs scale. Just use your cell, or should I call back? Did it come back? No.

Hey, Tom, can you hear us?

Yes, we can. Okay. All right.

Where did we stop? You said, "Our investments in testing and manufacturing." I don't think it ever cut off.